Options activity provides a look at expectations on MU, NFLX and TWTR

U.S. stock futures are trading higher this morning. Wall Street showed some relief after the European Central Bank (ECB) left interest rates unchanged. The ECB also said it would continue its asset purchase program.

However, this optimism is on pins and needles as traders brace for President Donald Trump to implement his tariff plan. Trump could sign the decree as soon as this afternoon, including a potential 25% tariff on steel imports and a 10% tariff on aluminum products. Mexico and Canada could be exempt from the decree, after protests from House Republicans.

Heading into the open, Dow Jones Industrial Average futures have added 0.20%, S&P 500 futures are up 0.31% and Nasdaq-100 futures have gained 0.55%.

Turning to the options pits, volume remained light on Wednesday. About 16.1 million calls and 14.7 million puts changed hands. The CBOE single-session equity put/call volume ratio rebounded to 0.58. The 10-day moving average held at 0.62.

Micron Technology, Inc. (MU)

Micron stock options have been quite popular this week, and for good reason. MU stock has surged more than 43% off their Feb 9 bottom. The rally has not gone unnoticed.

Analysts at Susquehanna touted Micron’s leadership in the semiconductor market, reiterating a “positive” rating and a $60 price target. Susquehanna also noted that, “Cost leadership can also enable MU to become aggressive on market share gains without sacrificing margins.”

As for Micron stock options, volume yesterday hit 322,000 contracts. Calls made up 74% of the day’s take. As a result of this bullish activity, MU’s April put/call open interest ratio has fallen to a reading of 0.48, with calls now doubling puts among back-month options.

A note of warning, however, as Micron stock is now overbought, with its 14-day relative strength index trading north of 70 for the past three days. Along those lines, you might want to check out yesterday’s article from InvestorPlace’s Serge Berger for an analysis of MU’s downside risks.

Netflix, Inc. (NFLX)

Netflix stock is always contentious on Wall Street. Yesterday was no exception. Most of yesterday’s financial headlines detailed Stifel’s downgrade to “hold” from “buy.” The ratings firm cut NFLX stock due to valuation concerns, as the share hit Stifel’s price target of $325.

Much fewer financial headlines covered UBS and Macquarie’s price-target increases on Netflix stock. UBS raised its price target from $290 to $345, while Macquarie boosted its from $275 to $330. What’s more, UBS said that Netflix was a “content powerhouse” with the ability to appeal to both domestic and international subscribers.

Despite the media’s focus on the downgrade, Netflix stock options traders took the bulls’ side. Volume on NFLX rose to 232,000 contracts, with calls claiming 53% of the day’s take — an above average daily reading for Netflix.

As a result of this added bullish attention, NFLX’s April put/call OI ratio has fallen this week from 0.88 on Monday to 0.77 today. What’s more, Netflix stock appears poised to eclipse Stifel’s price target today, with the shares up more than 1% in premarket trading.

Twitter Inc (TWTR)

Cryptocurrency scams are on the rise, and Twitter has become a hotbed for such activity. Twitter is aware of the problem. A Twitter spokesperson told Bloomberg yesterday that knew about cryptocurrency “manipulation” and was taking measures to “prevent these types of accounts from engaging with others in a deceptive manner.”

Admittedly, Twitter stock’s bullish options volume and rally yesterday were more likely based on technical patterns than cryptocurrency news. But, given the rabid nature of the crypto crowd, one can never be too sure.

Technically, TWTR broke above potential resistance at $35 yesterday, creating a “buy” signal for many traders looking for just such a breakout. Twitter shares are now up nearly 50% since the beginning of the year. The shares are also currently overbought.

Twitter stock options traders also jumped on the move. Volume topped out above 154,000 contracts, with calls gobbling up 74% of the day’s take. Looking out to April, the put/call OI ratio rests at an annual low of 0.25, with calls quadrupling puts among back-month options.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.